Sunday, September 23, 2007

US housing futures

Wow! now we can trade 5 year housing futures for the US. See article by Matthew Hougan here . A 15%-25% fall in real estate prices - unadjusted for inflation, is expected.

Sunday, September 16, 2007

Moody's Coproration MCO

Moody's (MCO) is an interesting company. To the unsophisticated like me it seems like they give you three letters like "AAA" and get a load of cash in return. Even Warren Buffett holds a stake. It seems like the perfect business to own - has a moat and has low requirements for capital.

What could go wrong? Recently the price has fallen on fears of lawsuits related to its role in the subprime lending mess. I am not qualified to comment but I feel that "Cogitarius" has done a good job summing up the issues on a Motley Fool board here.

So should I buy? Naah! If you know me you know that I have a way of avoiding value traps. I will not buy unless there is some confirmation from insider buying. You can see the insider trades for Moody's here. So if I see more insiders buying in the open market I will jump in.

Friday, August 24, 2007

Top picks - Reasonable valuations and insider buying.

So we have two companies at reasonable valuations and with strong insider buying. These are my top picks for the next year. I already hold Bright World and will place an order for Super Cofeemix when I can arrange some cash next week, if it does not rise above 0.8 SGD.

Insider buying in Singapore may not be what it seems. In her book "Show me the Money" Volume 1, Teh Hooi Ling reports ( page 117 ) that - based on a NUS honors thesis by Jaikishin " Insiders tend to conceal information laden buy trades through the use of family members or friends... Insiders also .. buy their own shares in order to support the share price. Or some of the trades were carried out to confuse the market or mask their real intentions."

I am not sure if disclosure norms have changed since that study was carried out(1990) so the results may no longer be valid. She does suggest though that significant buying by multiple insiders may be a good long term indicator.

Anyway do your own research, your investments are your responsibility alone.

Friday, August 17, 2007

Super Coffeemix Manufacturing

Super Coffeemix Manufacturing . Price .71 SGD, NAV 0.42, PE 14, P/S1.9, ROE 13.7, P/CF 11, LD/E 0.01, Yield 3%. Makes instant beverages (tea/ coffee ready mix) and convenience foods . Has been on my to research list for a long time, somehow I assumed the company had gone private and I forgot about them. Looks like it is still trading. See messageboard. Nice Annual Report , see quarterly report, and here. Sinagpore Exchange sponsored research reports are here .

From the reports we have

- 39,300,000 new ordinary shares were issued to CIM II Pte Ltd at S$0.60 per share, and
- 10,000,000 new ordinary shares were issued to Quek Chee Hoon at S$0.60 per share.
Post issue total shares are 542,542,980 and also we have 900,000 options issued to management.

My guess would be that if management think that S$0.60 is a good price to inject fresh cash then we can consider that to be a good price to buy.

Company has grown sales and gross income June end quarter by nearly 25%. Net profit skewed by other income from property sales. According to Shares investment No 301 Company has been profitable and paid dividends while growing sales and profits since records start from year end 2003. Possible negative is diversification into property development in Jiangsu China.

So it looks like a stable dividend paying and growing company in a defensive business, Reuters give long term D/E of 0.01. It does not pass my high ROE or low p/book screen but I can make an exception if the price is right as signaled by insider buying. Insiders seem happy to buy in the open market at S$ 0.83, price has fallen since then. Am thinking of placing an order.

I have tried their products. My office used to provide their instant tea packets in the cafeteria, the stuff is not great, but it is convenient, instant food will be with us for along time. Am off to make some instant coffee. Noted that its products are stacked in supermarkets and 7/11 stores right next to Nestle equivalents, so it seems to be holding up against the multinationals.

Thursday, August 16, 2007

Jardine Strategic - A Margin of Safety?

If you have read James Clavells books like TaiPan then you will love the Jardine group.

For the background see

I own Jardine strategic holdings, bought for its discount to Net Asset Value (NAV as reported in the balance sheet). It had turned up in a ROE/PTB screen I mentioned in an earlier post.

Some recent news.
Jardine Matheson the other jardine company said
"shareholders in Jardine Strategic are being invited to tender Jardine Strategic shares in the range of US$14.00 to US$14.50 per share representing a premium of up to 9.5 per cent. over the average closing price of the shares"



"Net asset value per share up 27% to US$24.69"


So put simply the offer is at USD 14.5 - a big discount to the USD 24
NAV of Jardine strategic. An unacceptable offer, I am not handing in my shares. But maybe this is simply an ploy by the owners to prop up the price of Jardine strategic to prevent a raider from getting a big stake. The price has certainly risen to the offer price though I doubt anyone investing from the business perspective will sell at the offer price as it is below NAV.

So what you have is company growing in Asia available at a discount to NAV and it will not fall much more because of the buyback offer at 14-14.5USD - a margin of saftey. Right now it is trading around 13.5USD - 1$ less than the top of the offer range.

Sunday, August 12, 2007

Stock Screen Analysis

I will be analysing stocks from my previously posted screens here.

Incidentally I also I increased my ownership of Soundwill holdings and added China Print Power to my personal portfolio. I also recommended TCS (No ADR) and Wipro (WIT ) on the Indian Stock exchanges to my friends and family. I do not like the WIT ADR because it trades at a premium to the Wipro stock on the Indian NSE.

Tuesday, August 07, 2007

High ROE and low P/B screens

The results of my high ROE screen are here.
The results of my Low P/B screen are here.
The results of my 20% annualized return backtested screen are here.
I would have posted these in this article but the table formatting got messed up.

Tuesday, July 17, 2007

Singapore High RoE/PtB stocks reviewed

In a recent article in the Business Times Singapore (article removed) Teh Hooi Ling reports her study on using RoE ( return on equity) and PtB ( Price to Book) and the RoE/PtB ratio to select outperforming stocks on the Singapore Exchange. There was an update to the article on July 21(get it before it is archived).

By investing in only the top 10% of RoE/Ptb stocks she claims that from 1990 to 2006 you would have got a 41% annualized return excluding trasaction costs.

I am aware of the errors that can creep into such a study, I will not discuss them here, still I feel she is on to something good. The data on RoE and PTB in the article may be inaccurate. There are a lot of REITS and holding companies so not sure if ROE is relevant to them.

She also published a list of top ranked stocks. Let me analyze these here.
  • Jardine Strategic . Let me quote Neil McNamara from jardine who replied to my questions on this. "ROE is not a ratio that we would normally calculate for Jardin Strategic due to the significant property interests through its investment in Hongkong Land. However, based on the shareholders funds at 31.12.06, the ROE calculated using the underlying profit for the year is 6.9%. If the net profit is used, which includes the movement in valuesof investment properties, the ratio is 18.5%. The latter calculation will fluctuate greatly from year to year due to the movements in property values. The price to book, based on the net asset value per share at 31.12.06 of US$19.38 (calculated using the market values of the underlying investments) and a share price of US$13.80, is 0.71." . Thanks to Cougar3 who said .."The two Jardines are jointed at the hip and have significant cross-ownership interests in each other.
    My guess is that ultimately Jardine Matheson will make a tender offer for the shares of Jardine Strategic they don't own (about 20%) . Of the two at current prices, Jardine Strategic is selling at a significant discount to NAV and imho is. by far, the more attractive
    of the two for current purchase. And, if I am right about the possibility of a tender offer by Jardine Matheson for Jardine Strategic this would likely be at a price around NAV in order to be successful. Thus, buying Jardine Strategic might be an attractive way to ultimately own Jardine Matheson at a significant discount to it's current price.Both Jardines are well diversified into core industries with extensive interest in not only Singapore and Hong Kong but mainland China, and all of SE Asia. They, along with Cheung Kong might be considered the equivalent of GE in the US. Hard to find companies that have been in
    business for 175 years like Jardine. Despite the big move both Jardine stocks has had over the past 5 years they remain attractively priced and "value" plays imho." A quick check at Shares Investement no 302 shows both companies Jardine strategic and Jardine Matheson have been profitable and paying dividends since record begins in 2002. Am placing a buy order for Jardine strategic.
  • Noel Gifts. .
  • New Wave. .
  • HengXin Tech. .
  • KSH Holdings. .
  • TexChem Pack. .
  • ContelCorp. ..
  • Transpac Industrial. ROE 27 , PTB 0.95. Investment Company. See SGX announcements. Messageboard. Annual report. According to the annual report the Company has no staff costs as its operations are fully managed by its Investment Manager.See annual report pg 33 note 7, very roughly put investment manager is paid 20% of money made after tax. Income statement not important. Balance sheet shows it has grown book value from 1.55 SGD yr end 2002 to present 4.04 (calculated reported bv, ex latest 0.54 div and previous $0.36 div) and paid nearly 1S$ +latest s$0.54 in dividends. That very approximately means a greater than 20% CAGR book value + dividend returns. Very illiquid. No mention in Shares investment in recent issues so cannot look it up. Did badly a decade ago. Illiquidity and memories of bad years during the asian financial crisis may mean that it may trade at a larger discount of 20% or more. May buy this if it falls more around a PTB of 0.8.
  • K1 Ventures. .
  • Nera Telecom. .
  • China Print Power. ROE 37, PTB 1.7, price 0.255 SGD,see messageboard,sgx. New IPO. According to Shares Investment issue 309 company has been profitable since reports begin from year end 12/2003. Div yield is around 5, p/e around 6, Long term d/e is around 22%. See recent report. Company is in a highly competitive business but I feel it is cheap and has limited downside due to dividend yield. Am placing an order. Update- Aug 14, am shareholder now. Read annual report, Change in auditor explained as due to people leaving old auditor. New auditors may have the same old people. Not significant.
  • GP Industries. .
  • China Paper. .
  • Adroit Innovat..
  • Plastoform. .
  • Sunray. PTB around 1 at S$ 0.22, ROE 8.29. According to shares investment no 310 this Obs. &Gyn. medical apparatus maker has been profitable since records begin from year end 2003. 2007 was bad year with revenue declining around 20% and profit declining 50%. No dividends in 2007. Paid 0.007 S$ a year ago,payout ratio then was around 20%. Shares Investment article has phrases like "disruption due to fire in Gatong Industrial park.","restruct in medical industry". Also placed new shares at S$0.46 to Kim Eng in 2006. See messageboard, announcements,report. .Maybe this is just a small company facing a temporary problem. Selling by large holders. Last time an insider bought was here
    at S$0.29.Not sure about this one, will pass.
  • Jardine Matheson. .
  • NatSteel. .
  • PCA Technology. .
  • Jurong Tech Indus. At price 0.93.ptb 1.6, NAV S$.559, pe 5.8 yeild 5.4,d/e >1 See messageboard,report. High d/e will pass for now.
  • HongKong Land.p/b >1 .See report. Not enough discount to book , will wait for more discount to book.
  • Tuan Sing. at 0.35 sgd p/b 1.58 ,roe 22% p/sales 1.1, Long term D/E 0.71. See messageboard, announcements , According to Shares Investmnet isseu 210 There have been no dividends or growth in shareholders funds since 2002. Not to my liking.
  • Allco Commercial Reit. p/b 1.05 at price 1.11 SGD, yeild 4.4 %. See messageboard, sgx announcements, report. Nice Reit promising stable returns, but not interesting to me.
  • Fortune Reit. HK$6.25, yeild 5.48,p/b 0.73. See, outdated report, Sgx announcements, messageboard,website,factsheet. According to shares investment 307 has grown book value and paid dividends since 2004. Temasek holdings as shareholder gives some confidence to me. Need to investigate more.
  • Broadway Indus. price 0.81SGD, p/b 1.7,yield .75%,ROE 32, LT d/e 0.15. See messageboard, announcements .Strange quick buying and selling by large shareholders on the SGX announcements page. According to Shares Investment no 307 has grown sales and profits since records start from 2002. Its in highly competitive business of manufacturing small machined parts. Not convinced, would ask for more div yield..
  • China Printing.price 0.30, p/b 1.5, roe 28,yeild 3.4%, LTd/e 0.05, .See messageboard,SGX announcements. New listing profitable since records available -2005Worth more research.
  • Bright Orient. SGD 0.17 , p/b 1.1.4,yield 2.48%, p/e 12.9, ROE 9.39,Lt d/e 0. Apparel manufacturing and retail co .See messageboard, SGX announcements. Annual report. Margins low. Will wait and monitor more before investing.
  • AEM. ROE 18, P/B 1. see messageboard. Legal problems. Senior management, CEO under investigation by CPIB- sent on leave replaced by acting CEO.SGX announcements. Atlantis Investments increasing stake in open market. If you like special situations this is for you.
  • Valuetronics. SGD 0.26, PE 9, yield 3.4,ROE 33, NAV 0.123, P/b 2.1, Zero Long term debt. Electronics contract manufaturer.See messageboard, announcements, IPO prospectus. According to shares investments 310 has been profitable since records begin from 04, listed on SGX in 07 at 0.26. Looks good to me. Need to compare vs Electrotech.
  • Singapore Windsor. Price 0.30 SGD,NAV 0.35,p/e 6,p/b .86,yeild 6.18%,ROE 26. PCB related manufacturer ( why so many on this page?). See messageboards,announcements, annual report. According to Shares junction 304 profitable since records begin in 2003. Listed in 2006. Looks cheap.

Thursday, July 12, 2007

Its here! DEM - Emerging Markets High-Yielding Equity Fund

See this announcement. The corresponding index is here.

I have been waiting for this for a long time. Dividend weighted indices where stocks are present in the index in proportion to cash dividends paid appeal more to a value investor than a market cap weighted index where stocks are present simply because their market cap is high. Market cap is (no of shares) X (price per share) or what you would have to pay to buy all the shares in the company.

Anyway the numbers as mentioned in the links above are:
Dividend Yield 6.28
Price/Earnings 14.87
Estimated Price/Earnings N/A
Price/Book 2.22
Price/Sales 0.68
Price/Cash Flow 5.57
5 year volatility
10 year Index backtest
vs 10 year MSCI EM

India and Russia surprisingly have less than 1% representation each. China is represented indirectly via H shares listed in Hong Kong. The ETF expenses are a hefty 0.63%.
The underlying index has a compelling 6.47% gross yield however as they warn
"Gross Index Yield reflects yield on index constituents prior to individual country
withholding taxes and is not related to the distribution yield of the fund." The volatility is also high - not that a buy and hold for decades investor like me cares about volatility.

To summarize I would prefer this to EEM. I admit to a personal bias for fundamental indexing.

I do not have a position in this yet.

Wednesday, July 11, 2007

Personal portfolio

Here is what I own and why.
  • Indian Mutual Funds
    • HDFC Equity - Not merely outperforming but crushing the indices for 10 years. Manager Prashant Jain has been around with the same fund team for a decade (Zurich then taken over by HDFC). He took over this fund a few years ago when its previous manager Chandresh Nigam left. Knowing that Prashant has an exceptional record with HDFC prudence I decided to retain this fund.
    • HDFC Prudence - Prashant Jain - manager since 1994. Outstanding record - see the link for yourself. Formerly the fund was a balanced fund 60% equity 40% debt, Now it is an "Equity Oriented fund"70% equity 30% debt. The recent increase in Equity allocation is to take advantage of Indian Tax laws that state - no taxes on equity oriented funds held for more than one year. I am no fan of mutual funds, these have sales loads of 2.5% and annual expenses of 2% but their returns have more than made up for that. I do not like balanced funds either, there is no reason why any long term investor should hold bonds in his portfolio. HDFC equity is preferable to HDFC prudence unless you have some expenditure planned in the coming years and want to limit your downside. I bought this fund a year or so ago as I wanted less downside due to foreseen personal expenses. Now that those expenses are paid for I intend to sell and move to a 100% equity portfolio. The best time to sell this however eludes me. I would wait for a dip in the markets to sell this and buy either HDFC equity ( a no load switch within the same fund house ) or Franklin Opportunities ( will have to pay load).

  • International ETF's
    • DFE - See the Index here. Small value stocks from Europe. Fits in nicely with my theme of owning small value stocks. I like the Wisdomtree dividend weighted Indices.
    • EWY - MSCI Korea was cheap compared to Singapore and Taiwan when I last looked. Was bought when there was tension with the neighbor to the north. I do not own EWY but the equivalent Lyxor MSCI Korea ETF trading on the Singapore Exchange.
  • International Stocks
    • Bright World Precision Machinery - Turned up on a Greenblatt style low P/E, high ROE , no long term debt screen. Bought on the Singapore Exchange. I usually sell such stocks when they cross a P/E of 20.
    • Second Chance Properties - Turned up on a high dividend yield screen. Bought on the Singapore Exchange. Need to review this when latest results come out.
    • Food Junction -- Turned up on a high dividend yield screen. Bought on the Singapore Exchange. Company faced a recent setback in china. Need to review this. See recent discussions here.
    • -- Soundwill Holdings. Low P/Book stock. Thanks to "idoke" on the chucks_angels yahoo group for suggesting this one. Bought on the Hong Kong exchange.
    • City e-Solutions. Low P/Book stock. Thanks to "deepmarginofsafety" on the chucks_angels yahoo group for suggesting this one. Bought on the Hong Kong exchange.
    • Brk-b - Berkshire Hathaway. Have discussed this in previous posts. This is where I park cash when I have no better ideas.
  • Recent Sells:
    • Sinwa - Greenblatt style pick. Bought on SGX. Reached exit point of 20 P/E.
    • STI - Streettracks Straits Times Index ETF. Like the MSCI Singapore index (EWS) but with many more stocks. Trades on the Singapore Exchange. Attempted sell when the STI hit a P/E of 20. Sell order failed, have to investigate.
    • - Aluminum Corp. of China Ltd. (Chalco, ADR is ACH) . Was a low P/Book pick. Looks like I miscalculated P/Book. Sold as soon as I realized error. Will not ever trust yahoo finance for my data. Was lucky to make a profit.

What I do not own but recommend
  • My family has investments in assorted tax saving Indian mutual funds and some short term debt funds. Tax saving funds are the best way to make your tax saving investments. Short term debt funds are a good and liquid way to park excess cash you may need in the near future.
  • My suggested portfolios for Indian Investors are on the longtermequity yahoo group. These may differ from my personal portfolio.

Tuesday, June 05, 2007

Indian ADRs - losing their premium.

Infy has lost its premium on the US Nasdaq exchange vs the Indian Bombay stock exchange.

See this page from Equitymaster.

DR Reddy(RDY), HDFC bank (HDB), ICICI (IBN), And Infosys(INFY) are some good stocks with an ADR premiun of less than 5%.

I will write more about these when I have the time. I do not own any of these directly, but may have indirect holdings via mutual fund.

Thursday, May 31, 2007

My personal international portfolio

I intend to track the part of the portfolio that can track and make it public.
The purpose is to invite criticism and comments.
The dollar amounts are scaled a secret number - 10 times or more. I do not have the 1M to invest that marketocracy needs. The percentages of the holdings are approximately correct.
I have excluded my direct investments in India and Singapore that marketocracy can not track.

Here it is , click on the image for a bigger view...

You can preview the public page here.

Sunday, May 27, 2007

Berkshire Hathaway a bargain at present prices ?

According to yahoo finance Berkshire trades at 1.52 times book value. This is near its historical bottom and below its average for the last 10 years. See this post on the chucks angels group for the calculations.

I own some brk-b (class B stock ) of berkshire hathaway and feel that its CEO Buffett is finally finding good opportunities to invest the tens of Billions or so in cash he had lying around into higher returning stocks. This may drive returns higher than the SNP 500 by a few points over the next decade.

Buy and hold investors, especially those who are heavily taxed should give the stocks a look. Berkshire does not pay dividends so you only pay taxes when you sell.

I also recommend the Chucks Angels group for people wishing to do more research on Berkshire Hathaway.

Wednesday, March 21, 2007

The Hardest problem in investing

You buy and the market immediately dips, the stock price may stay
below your buy point for years for no fault of the company.

It is possible that the World may go into recession
tomorrow, good companies will still deliver and grow value but
psychologically there will be pain. We have had a long bull run and we
may have a long bear run too. Being prepared for the inevitable will
make it less painful.

Here is what I use to help me stay the course.

1) The company must pay a dividend that can be reinvested at good
rates if prices fall. There must be no danger of cutting dividends.
There are some exceptions to this rule ex Brk-b and Infy.

2) Insiders are buying. Knowing that the Insiders have bought at
higher than market prices is fundamentally meaningless but
psychologically very comforting.

The above two tricks may help you stay the course. As an example in
Japan even in the long years of market stagnation, dividend reinvested
indices have given positive returns.
For example see
The high dividend stocks of japan have returned 7.5% while msci japan
(not msci japan value in the above link) has returned around 3% annualized total returns
for the last decade. Staying invested has beaten selling out and putting your money in the bank.

Monday, March 12, 2007

Singapore, Taiwan and Korea msci index comparisions

MSCI Korea: 10Yr returns: 13.09, P/E=15.88, P/B=2.26 Semiconductors=19.78% of Index
MSCI Taiwan: 10Yr returns: -1.58, P/E=20.17,/ P/B=3.24, Semiconductors =24% of index
MSCI Singapore: 10Yr returns: 2.83, P/E=19.9, P/B=2.83, Banks=35.17% of index

Based on a simplistic analysis of the above I would say that Korea is the best buy. Buffet seems to agree and has picked up some shares in the steel major POSCO which is 7.6% of the Korean index.

In Singapore you can buy the Lyxor Korea ETF , in the us you can buy EWY.

Disclaimer: I already own the Lyxor Korea ETF and am invested in a Singapore Index.
I am not sure if the numbers above include reinvested dividends. The P/E also seems to be different from other estimates I have seen, possibly because they may be using only annual figures and not TTM and also because the more bullish analysts usually mention forward P/E instead of trailing P/E.

Sunday, March 04, 2007

Know nothing about stocks? Then buy this hedge fund like stock.

Berkshire Hathaway (symbol BRK.B) is the best stock to buy if you know nothing about investing. Unlike a mutual fund manager; CEO Warren Buffett has no limits on what he can do. He runs the company like a fund holding investments in stocks and directly owning several companies like GEICO. His track record is exceptional and the shares (brk.b at US$3550) trade at a price/book of around 1.55 which I feel is cheap for its class and historical average. Morningstar rates it as trading below their buy point which is around 3900 USD per share.

Of late the stocks growth has slowed as Buffett has found few companies of adequate size to invest the 40 Billion US $ in cash he has lying around. However he remains confident of doing better than the broad markets over the next decade and sees no need to declare a
dividend or share buy back.

He has taken in a big way to international investing buying shares in Israel, China and recently Korea.

There is no chance that he will match his historic 21% rate of return but he should do better than broad markets. Note the advantages to US Tax sufferers,this stock pays no dividends to be taxed on and unlike a US mutual fund you only pay taxes when you sell the stocks.

As for valuations buffet himself uses book value to measure his performance, so a buy when price to book is below 2 and consider selling when price/book is greater than 3 is my opinion.

But hey! you decide for yourself, go read the annual letter from Buffett himself at

Another good source of information where you may post queries is the yahoo group

The yahoo finance link for class A shares is
The yahoo finance link for class B shares is

One class B share is 1/30th of a class A and so should trade at 1/30 of a class A share. For most ordinary folks the difference is not important you may buy any of these and get the same value for money.